Does COVID Justify Longer Periods of Reasonable Notice?

Written by David Doorey, York University

Last week, an Ontario court issued an interesting decision that considered whether COVID’s impact on the job market justifies courts ordering longer periods of “reasonable notice” in wrongful dismissal lawsuits.  For Employment Law students, remember that contract law requires that employers provide non-union employees with notice of termination.  The amount of notice is determined by the contract. If the contract specifies the amount of notice required, and that term does not violate employment standards legislation, then the employer must provide the amount of notice specified.  However, if the contract does not specify how much notice is required (or the notice term is unlawful), then the courts will “imply” a requirement to provide “reasonable notice”, which is an amount that courts assess applying a variety of factors known as the Bardal factors.  All of this is explained in  Chapter 10 of my book The Law of Work.

The decision is called Yee v. Hudson’s Bay Company 2021 ONSC 387

Facts in Yee v. HBC

Yee was hired by HBC in 2008.  In 2015, he accepted a new position called Director, Product Design and Development, Private Brands and at the time he signed a written contract that included rules about payments in the case of termination.  In 2018, Lee changed jobs again, and he signed a new letter (“Transfer Offer Letter”) that superseded any prior agreements with HBC.  This Letter did not included any written agreement about payments and notice in the event of termination, with the result that Lee was entitled to implied “reasonable notice” (see Chapter 10 of The Law of Work).

In 2019, Lee was terminated.  HBC relied on the initial 2015 letter in its termination letter and provided Lee with 11 months’ notice. However, during the litigation proceedings, HBC produced the 2018 Transfer Offer Letter, claiming that the HR person who wrote up the termination letter had not noticed it in Lee’s file.  Lee’s lawyers argued that the employer’s reliance on 2015 letter amounted to bad faith in dismissal entitling Lee to moral damages, but the court dismissed this argument, finding that it was oversight.  HBC argued that in any event, the 11 months’ it provided Lee was “reasonable” considering the “Bardal” factors.   Lee was 62 years’ old when he was fired and had been employed by HBC for 11.5 years.  He was a senior managerial employee.  Lee argued reasonable notice was 18 months.

Decision

The decision itself is standard wrongful dismissal fare. What makes the case interesting is the court’s brief consideration of the COVID effect on reasonable notice.  One of the Bardal factors is “availability of similar employment, having regard to the experience, training, and qualifications” of the employee.  There’s a long-standing debate in the Common Law Regime about how this factor should be applied.   The debate centres around the question of the extent to which notice should be extended due to a downturn in job market.  It’s logical that if an employee is dismissed at a time when there are hardly any jobs available in the employee’s field, then the employee will probably have a harder time finding similar alternative employment.

So, for example, some judges have extended the period of notice to account for this factor, such as in Lim v.  Delrina Corp, where the judge increased the notice period by 1/3 due to the poor market for accountants when the employee was terminated.  More recently, in Paquette v. TeraGo Networks, Justice Perell noted that a downturn in the economy may justify a longer notice period.

On the other hand, employers have argued that the purpose of reasonable notice is not to provide unemployment insurance in the event of economic downturns.  Moreover, in bad economic times, the employer itself may be in financial peril and therefore requiring extended notice periods could further threaten the viability of the enterprise precisely at a time when the employer needs to be able to make adjustments.  This latter argument was rejected by the Ontario Court of Appeal in its 2015 decision in Michela v. St Thomas of Villanova Catholic School.  The Court of Appeal ruled that the employer’s financial circumstances are not relevant in the assessment of reasonable notice.

In Lee v. HBC, the court was asked to consider COVID’s impact on the job market warrants a longer period of notice.  Yee argued that COVID’s impact on the prospect of finding a new job justifies a notice period “at the highest possible end of the appropriate range”.  Yee applied for some 90 jobs after he was terminated and got none of them.  HBC argued that the fact that Yee was able to apply for 90 jobs was evidence that there were jobs in his field after COVID hit.

The court ruled that COVID’s impact on the job market is relevant for dismissals that occur after COVID hit, but not for terminations occurring before COVID.  The reasoning appears to be based on a finding that notice is to determined by the circumstances that exist “at the time of termination and not by the amount of time it takes the employee to find employment” (citing from Holland v. Hostopia.com, 2015 ONCA 762).
Here is the relevant passage from Lee v. HBC:

Counsel for Yee submitted I should take into account the recent COVID pandemic and the resulting significant increased difficulty in obtaining comparable employment.  Counsel pointed to the approximate 90 applications made by his client without success as evidence.  To be clear, counsel for Melvin Yee submitted this provided a basis for awarding a notice at heightens possible end of the appropriate range.  Counsel for HBC submitted the high volume ion applications was evidence of many comparable positions and the timing of these applications, being post February, was evidence such positions were available in the post COVID economy and that the contrary conclusion was the proper result.

In support of Yee’s position, I was directed to the statement of Justice Perell in Paquette v. TeraGo Networks that “economic factors such as downturn in the economy or a particular industry or sector off the economy that indicate that an employee may have diofficvulthy finding another positions may justify a longer notice period”.  However that statement needs to be considered with the statement in Hollard v. Hostpia.com that “notice is to be determined by the circumstances existing at the time of the termination and not by the amount fo time that it takes the employee to find employment.”

It seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment.

In the end, Justice Dow ruled that 16 months’ was the appropriate notice period. It’s not entirely clear whether or to what extent COVID influenced that length of notice, because the judge does not indicate whether the period would have been longer or shorter if COVID didn’t exist.  The court ordered HBC to pay Yee damages in terms of lost wages and benefits (including a bonus and pension contributions) for 16 months (subtracting what had already been paid out to Yee).

Questions for Discussion

What do we think about the judge’s conclusions on COVID’s impact on “reasonable notice”?  Do you think that courts should extend the notice period based on assumption that it is more difficult to find jobs due to COVID?  What do you think of HBC’s argument that the fact that Yee applied for 90 odd jobs is evidence that there are in fact jobs available, even though Yee didn’t get any of them?

David Doorey, “Does COVID Justify Longer Periods of Reasonable Notice of Termination?” Canadian Law of Work Forum (January 25 2020): https://lawofwork.ca/covidnotice